Why is the Syrah share price crashing 14% today?

Syrah shares are deep in the red on Thursday…

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Key points

  • Syrah shares are crashing on Thursday morning
  • This follows news of an attack on a nearby mine by insurgents
  • Investors appear concerned that these attacks could spread and threaten Syrah's Balama operation

The Syrah Resources Ltd (ASX: SYR) share price is under significant pressure on Thursday morning.

At the time of writing, the graphite producer’s shares are down a disappointing 14% to $1.32.

Why is the Syrah share price sinking today?

The weakness in the Syrah share price on Thursday has been driven by events near Ancuabe in the Cabo Delgado Province of Mozambique.

This is 200 kilometres away from Syrah’s massive Balama Graphite Project, which is also in the Cabo Delgado Province.

According to the release, the company has received reports of an insurgent attack at a mine project site near Ancuabe. This is the second attack this week in the district of Ancuabe.

The release notes that prior to these incidents there had been a significant improvement in the overall security situation in the province. However, the situation now appears to be deteriorating quickly, which could have some investors fearing that the attacks will spread to Balama in time.

What’s happening?

Syrah advised that the incidents occurred between 30 kilometres and 40 kilometres from the N1 road, which is the primary transport route between Balama and both Nacala and Pemba.

In light of this, Syrah and its logistics service provider have taken the precautionary measure of suspending all personnel and logistics movements through the route section until further information is available.

At this stage, Balama’s mining and processing operations have not been impacted.

Management advised that it retains close contact with Government, security authorities and other stakeholders to monitor the situation and assess the safe resumption of transport operations.

All in all, this is another example of why investing in companies operating in areas close to conflict zones or in countries with high levels of corruption, such as AVZ Minerals Limited (ASX: AVZ), carry significant risk and should be treated with caution.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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